The writing on the wall: A connectedness-based analysis of ownership structure and bank risk in China

Feng-lin Wu, Jia-qi Zhou and Ming-hui Wang

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: This paper studies how the banking system was affected during the crisis by investigating risk transmission and shock impact mechanisms. After classifying the sample banks in China into state-owned commercial banks (SOCBs), joint-stock commercial banks (JSCBs), and city commercial banks (CCBs), we find that SOCBs exhibit higher systemic risk spillovers, and they are more likely to act as risk transmitters; JSCBs tend to have higher conditional at-risk values, with some assuming the role of risk transmission; CCBs have smaller results for both factors and tend to act as risk takers. We also examine how banks with different ownership structures respond to external shocks and find that SOCBs have the fastest and most accurate judgment, while CCBs are slower and more prone to bias. Finally, we observe that the investor sentiment of bank categories containing risk transmitters is more sensitive to external shocks than those consisting entirely of risk takers.

Keywords: Systemic risk; Bank risk; CoVaR; Volatility risk; Connectedness network (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003971

DOI: 10.1016/j.irfa.2024.103465

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